March data jeopardise 29-year record of growth

AUSTRALIA’S economy contracted 0.3 per cent in the March quarter, according to official figures that mostly predate the economic damage from COVID-19 lockdowns.

Gross domestic product grew just 1.4 per cent in the 12 months to March 31 as the economy took a hit from the bushfires and the beginning of the coronavirus crisis, the Australian Bureau of Statistics said.

“This was the slowest through-theyear growth since September 2009, when Australia was in the midst of the global financial crisis, and captures just the beginning of the expected economic effects of COVID-19,” ABS chief economist Bruce Hockman said yesterday.

St George chief economist Besa Deda said it was expected. “It looks a lot better than some of the other economies around the world,” she said.

Economists had said there was an outside chance the readout would be flat or positive, which would have given Australia the chance to extend its unprecedented run of more than 29 years without a recession, which economists define as two consecutive quarters of economic contraction.

With Australia’s economy certain to shrink this quarter – the consensus is for a contraction of about 8.5 per cent – it’s clear that Australia will record its first recession in almost 30 years when the next GDP figures are released in September.

Westpac economist Andrew Hanlan said the key downside surprise in the figures was that consumer spending dropped 1.1 per cent.

“While retail rose, spending in other areas was hard hit by the pandemic,” Mr Hanlan said.

While spending on goods rose – notably in food and pharmaceuticals – spending on services such as travel, dining and recreation fell sharply.